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Retail sales growth in most major Asia Pacific markets moderated in H1 2024 as prolonged high interest rates weighed on domestic demand. However, the negative impact was cushioned by the solid rebound in international visitor arrivals, particularly in Japan.
Consumer confidence in mainland China and Hong Kong SAR weakened amid the subdued economic outlook. Discretionary spending was hardest hit, with Hong Kong SAR also suffering from the loss of consumer spending to neighbouring markets such as Japan and mainland China.
Mid-year review
Asia Pacific will see weaker consumer spending growth in 2024 on the back of the softer economic outlook. Many consumers will turn more cost conscious, leading them to eschew relatively expensive goods in favour of lower-price brands. While the gradual recovery in outbound tourism from mainland China will continue, spending is unlikely to return to pre-pandemic levels.
Forecast made in January 2024
Consumer sentiment to remain lukewarm
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CBRE’s June 2024 Asia Pacific Leasing Sentiment Survey found that retailers’ expansionary demand remains resilient, with F&B and sports-related retailers the most active.
Vacancy in prime shopping precincts has returned to pre-pandemic levels on the back of solid flight-to-core-and-quality demand.
CBRE expects retailers to adopt a more cautious approach towards committing to new space as many have already rebuilt their store networks from pandemic-induced closures. Coupled with the fact that some landlords have gradually strengthened their stance, the lease negotiation process could take longer and hence hinder deal flow in H2 2024.
Mid-year review
Despite retaining a cautious approach to CapEx and store network planning, retailers are poised to capitalise on favourable market conditions to upgrade and expand in 2024. Flagship units in prime retail space will remain keenly sought after as retailers look to enhance consumers’ shopping experience. Alternative options in up-and-coming neighbourhoods or heritage buildings will also attract more interest.
Forecast made in January 2024
Retailers to display solid expansionary demand
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The rental recovery will continue to be driven by prime assets in core locations. With retailers retaining a disciplined approach towards real estate planning, weaker interest in secondary assets will translate into softer rental growth for such properties.
The Ho Chi Minh City and Hanoi CBDs reported the strongest rental growth in the region for a second consecutive year due to the absence of space suited to international brands.
Cities in mainland China remain the rental laggards amid limited leasing demand, which has prompted more landlords to lower rents and offer more attractive terms to attract tenants.
Mid-year review
Most Asia Pacific retail markets will register rental growth in 2024, although the magnitude of any such increases will be modest. Growth will be confined to a handful of high-profile assets, with prime core retail properties set to continue to outperform on the back of solid leasing demand.
Forecast made in January 2024
Rents forecasted to bottom out
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